Why the terms won't do

Geoffrey Robinson

There are two distinct aspects of the Common Market debate: the political future of Britain and Europe, with Britain in the EEC or out; and the economic future of Britain, in or out. As far as the political arguments go, I happen to favour a strong European voice within the Atlantic Alliance. But 1 do not see that this necessitates membership of the Common Market on the present terms and with its present organisation. There are plenty of existing institutions and organisations — none of which necessitates full membership of the EEC — that could be used to formulate the European position if the will to use them were there. The oil crisis, only too embarrassingly, showed it is not.

European political unity in any meaningful and acceptable sense is a long, long-term proposition and will never be worth having unless an economically and politically strong Britain is part of it. At present, Britain is anything but that; and the measures we need to restore our economic and political strength will require, in my view, a freedom to handle our economic affairs in our own best interests much greater than is available to us under the renegotiated terms of membership.

To explain this view one must recognise that our central problem is the declining surplus in real terms we have been earning on our trade and manufactures. At current prices the surplus has remained static around £2,000 million over the last fourteen years to 1974, representing a fall from 7.5 per cent GNP to some 3 per cent.

This would be bad enough in any circumstances, but coupled with the quintupling of the oil price and with the general rise in commodity prices over the last few years, it has led to a situation where we are in hock up to our eyeballs to the oil producers — perhaps to the extent of £5 billion to £6 billion of shortterm debts, the servicing of which alone must cost us £500 million a year. To regain national solvency, these debts have got to be repaid and this can only be done by reversing the declining trend in our manufacturing trade balance. The main factors that lie behind this debilitating trend seem to me to be as follows:

1. Britain has been investing, for decades, less in manufacturing industry than its European competitors and has been investing relatively more outside

the UK than its main competitors have done outside their respective homelands.

2. As a result we have, of our non-agricultural worltforce, fewer people in percentage terms in manufacturing industry than our European competitors and, while they have been employing more over recent years in the manufacturing sector, we have experienced a net exodus from it.

3. These two disadvantages are compounded by our wasteful use of such labour and already inadequate capital as we have.

4. Lastly, judging subjectively, from my own experience in the engineering sectors – whose importance can scarcely be exaggerated since, traditionally, they have contributed over 60 per cent of our exports of manufactures — we have, as a country, given too low a priority to the engineer, to technical training and to product development.

The consequence of these and other factors is that many areas of our manufacturing industry are not competitive or are not large enough.

The figures speak for themselves. Our trade in finished manufactures (the high value-added end: SITC categories 7 and 8) with the EEC has moved over the last five years from a surplus of nearly £200 million in 1970 to a deficit of nearly £400 million in 1974. Within those overall figures, the balance of trade in sophisticated machinery with Germany presents an even more frightening prospect, as Erich Strauss pointed out in the New Statesman of April 25.

The disadvantage to the UK of locating its investments abroad was graphically illustrated in figures published in last week's Sunday Times. These showed that in the period 1960-74, ICI's exports to Europe from the UK had increased threefold, while the sales of its European-based subsidiaries had increased four and a half times. The advantage to the UK of profit repatriation of, say 10 per cent on the £565 million sales made in Europe by the European subsidiaries in 1974 is nothing compared with the balance of payments and job benefits of having even half of those sales made in the UK and exported to Europe. Incidentally, the policy of the German chemical companies has been exclusively investment in, and exports from, Germany.

The task facing us as a nation over the next ten years is to build a larger, more capital intensive and more efficiently operated manufacturing industry of such size as to generate a surplus on our trade and manufactures sufficient, over a number of years, to wipe out our borrowing from the oil producers and to rebuild our reserves. Only in this way can we find secure employment for those already . Working in manufacturing industry and put our economy on a footing to be able responsibly to husband our North Sea oil resources. It is a formidable task, which will involve a painful shift in resources from consumption to investment to produce manufactured goods for export. But it is the only way back to national solvency. Considerations of European unity are, for me, utterly secondary to accomplishing this task. The only question to be asked and answered is whether such a recovery programme can be easily carried out inside or outside the EEC with the terms we are at present offered.

Before saying why I think the terms do not meet our requirements, let me say that there is a whole range of problems — managerial motivation, overmanning in virtually all our national activities, strikes, outdated or underdeveloped products — wholly ours and entirely up to us to solve, in or out of the Market.

Having said that, three aspects of the terms convince me that the deal with the EEC will make our task more difficult: the Common Agricultural Policy, the free movement of capital, and the provisions for free competition in trade. It may be argued that the EEC will be flexible on the latter two. After all, we have already invoked Articles of the Treaty to restrict capital movement, and the British Leyland rescue operation has received a most timely approval. But who can really guarantee continuing exemption on the capital front and continuing flexibility on industrial policy, particularly since some key industrial sectors or areas may well need more extensive state help than British Leyland. Inside the Market we shall have enormous difficulty countering the gravitational pull for jobs and investment to the continental industrial heartland.

Turning to the CAP, this is highly likely in the medium-and long-term to mean more costly food, increasing our inflationary pressures and our balance of payments deficit The whole point of the CAP was and is to protect high-cost European agriculture from the low-cost grain producers of North America, and from low-cost dairy and meat producers such as New Zealand and Argentina. The simple fact of climate and scale of cultivation' make this logic incontrovertible to me. The only conditions on which Britain could accept the basic concept and workings of the CAP would be if a Common Industrial Policy were implemented, so designed as to give British industry the opportunity, at some cost to the Community, to re-establish itself on an equal footing with its European rivals.

For me, therefore, membership of the EEC is still a matter of the terms. No doubt the Government did what it could in the renegotiations. But with the French they were up against the toughest negotiators in the business, and what was achieved was not enough. The present renegotiation has not altered what is fundamentally unacceptable in respect of the three factors discussed above.

Most intelligent pro-Marketeers know that we cannot stand the cost of membership and that better terms will have to be wrung out of our partners sooner or later. If that is so, then the sooner the better and a 'No' vote must be seen not as saying crudely "We want out" but as giving the Government a mandate to negotiate terms that will make it easier and not more difficult for us to put our house in order.

These terms could involve an associate arrangement or a fiveyear exemption period from the CAP, with freedom to rebuild our industry and to control the flow of capital within and without the UK in order to do it. The task is hard enough, and being in the EEC on the present terms will make it a lot harder for the working people of this country. If our partners in Europe really want us associated with them, if they really appreciate the extent of our problems, and if they really recognise the value of our past contributions then they should be prepared, if there is a 'No' vote, to give us terms to meet our requirements. If they won't, then we are certainly better off out.

Geoffrey Robinson was formerly Financial Controller of British, Leyland, Managing Director of Leyland-Innocenti and Chief Executive of Jaguar Cars.